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1 Financing Options Financial Aid 101 Mary Dyer, Default Prevention Specialist October 10, 2008.

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Presentation on theme: "1 Financing Options Financial Aid 101 Mary Dyer, Default Prevention Specialist October 10, 2008."— Presentation transcript:

1 1 Financing Options Financial Aid 101 Mary Dyer, Default Prevention Specialist October 10, 2008

2 Agenda Choices that impact college costs Ways to reduce expenses Financing options available to students & families: - Tuition Payment Plans - Federal PLUS Loans - Private Alternative Loans

3 Answer: How Can Students & Families Reduce College Costs? Choices!!!

4 Choices Include School selection Choice of major Enrollment level Work or play? Housing options Drive or walk? Optional expenses

5 School Choice Consider community college In-state school vs. out-of-state –What can the family afford for travel expense? State schools may cost less

6 School Choice (con’t) Important that students compare award packages when selecting a school What types of loans are included in the package? Apply on time EVERY YEAR to ensure the best package possible

7 Choice of Major Choice of major can impact the number of schools available Consider earning potential upon graduation Major can also impact the amount of financial aid received Consider loan forgiveness options

8 Enrollment Level Is tuition charged based on “per credit hour” basis or enrollment level (i.e. full time vs. half time)? Reducing course load may save money, but consider length of time needed to complete school Impact of attending school year round

9 Work or Play? Students should be working and SAVING for college expenses. At a minimum, students should save enough to pay for books and miscellaneous expenses (cell phone, late night pizza, entertainment, etc.)

10 Work or Play?, cont. Summer employment can result in significant savings The more students work, the less they borrow Myth: “If I work, they will take away my financial aid”

11 Housing Options On campus vs. off campus– is one option cheaper than the other? Need to consider cost of rent, transportation and food If on campus, type of room can impact cost – singles typically cost more than doubles and “suites” tend to cost more than standard rooms

12 Housing Options (cont.) If off campus, is the student willing to share with several people? Living at home can often save the student thousands of dollars

13 Drive or Walk? If the student is living on or near campus, consider leaving the car at home –Gas, insurance, parking passes & tickets –Unexpected repairs and maintenance can be costly –Students often have access to public transit

14 Reduce Expenses You mean my cell phone is optional??? Computer purchase/laptop –Many colleges have invested in expensive computer labs Cable/Internet –use college provided resources Cell phones –choose a prepaid plan

15 Reduce Expense, cont. Textbooks –buy early and USED!!! Clothes Vacations –spring break or working break??? Entertainment –campus events are often FREE!!

16 A Word About Credit Cards… These can be deadly… –Consider a debit card –Have credit card available only for emergencies and have limit on it –Student need to better understand the cost of credit and how expensive it is

17 Financing Options - Tuition Payment Plans - Federal PLUS Loans - Private Alternative Loans Financing options available to students & families:

18 Tuition Payment Plans Most colleges offer some type of tuition payment plan Plans are short-term (usually 12 months) These plans allow students & families to make monthly payments on tuition and room & board

19 Tuition Payment Plans, cont. Can spread the payments out over the course of a semester or year Plans are interest-free Nominal fee (usually $50-$100) is charged IMPORTANT: Can utilize a payment plan in combination with student and parent loans

20 Tuition Payment Plans, cont. Many offer an auto-debit option Payment plan counselors assist families in calculating their remaining bill Common plans include AMS Tuition Pay, FACTS Tuition Management and Advantage School Tuition Payment Program

21 Federal PLUS Loans Borrower is the parent of a dependent undergraduate student, or graduate/professional student Direct PLUS Loan funded through the federal government – borrower repays the feds FFEL PLUS Loan is funded through private lending institutions – borrower repays private lender

22 Federal PLUS Loans Borrowers must: pass a credit check be citizens or eligible non citizens not in default on federal student loan not owe a refund on any federal student aid program (nor can the student) PLUS Loans can fill need and/or replace EFC Undergraduate students are NOT required to file a FAFSA in order for the parents to borrow a PLUS Loan, but graduate students ARE required

23 PLUS Loan - Amounts Student’s cost of attendance - Other aid student receives = Maximum loan amount No aggregate maximum

24 PLUS Loans – Interest Rate The interest rate on FFELP PLUS Loans first disbursed after July 1, 2006 is fixed at 8.5%; for Direct PLUS Loans the rate is fixed at 7.9%. A few lenders reduce the interest rate under certain circumstances as a borrower benefit

25 PLUS Loans – Interest Rate & Fees PLUS Loan charges loan fees of up to 4%, deducted evenly from each disbursement While in deferment, interest accrues

26 PLUS Loans - Repayment Repayment begins 60 days after the funds are fully disbursed The repayment term is up to 10 years NEW!! Graduate students and parents can defer while student and/or parent is enrolled at least half-time, as well as during a six-month grace period. IMPORTANT - Interest that accrues on PLUS loans during deferment or grace period can be capitalized no more frequently than quarterly.

27 PLUS Loans – Application Process and Promissory Note Check with financial aid office to determine application process After credit check, borrower will be notified of approval or denial Master Promissory Note required – good for 10 years – tied to individual student

28 Alternative Loans Student is the borrower Often require co-signer with good credit history and debt to income ratio Do not need to complete the FAFSA Funded through private lenders Not federally regulated

29 Alternative Loans – Amounts Student’s cost of attendance -Other aid student receives = Maximum loan amount Aggregate maximum – varies by lender

30 Alternative Loans – Interest Rate and Fees Interest rates and fees vary by lender Most interest rates are variable and set based on the Wall Street Journal prime rate or the LIBOR rate Often interest rates and fees are structured so that they are less for those with better credit and debt to income ratio

31 Alternative Loans- Repayment Repayment varies from one lender to another Typically principal is deferred while student is in school, but interest accrues Many loans do have a grace period Repayment period varies depending on lender and amount borrowed

32 Alternative Loans – Application Process and Promissory Note Contact financial aid office Often, next step will be to apply directly through lender (phone/web site) If approved, lender will have student sign promissory note and then will send information to school School will “certify” the loan Some schools will require loan counseling

33 Responsible Borrowing Borrowing a loan is a given for most students Varies tremendously from one school to the next… not necessarily tied to the cost of the school Individual choices have a huge impact on the amount eventually borrowed

34 In Closing… Choices made early on can impact college costs and loan debt Options do exist Reach out to your financial aid office or FAME.

35 Questions?

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